Sound Bites: the case for inflation and Canadian stocks

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In my interview this week with Jim Goddard at Howestreet.com, I make the case that increases in government spending may wake the inflation bear out of its hibernation. In such an environment, the Canadian stock market could do quite well.

Already, Canadian stocks are enjoying the tailwinds of global economic growth being led by China and Ottawa's policy of sending out bigger handouts to lower and middle income families. Over the past 90 days, the INK Canadian Insider Index is up 7.5% while the S&P 500 Index is up 3.6%. Looking at Chinese loan growth, we see no evidence that a meaningful slowdown is taking place. That should continue to help the resource sectors of the Canadian market.

Meanwhile, the federal government has pledged to start indexing child benefits two years earlier than expected. If our take on inflation proves correct, those bigger cheques will come in handy and help sustain positive momentum behind Canadian retailers.

 

In the discussion, we talked about the possibility that we are now in a period of peak Amazon (AMZN*US). While the company reported flat earnings per share for the quarter on a year-over-year basis last night, investors in after hours trading cheered the results because they were better than expectations (which had gone through a series of revisions lower). If the stock gaps up at the open, it will be interesting to see if it goes on to make new all-time highs or instead ends up closing the gap back down. The stock currently has a Mixed INK Edge outlook, suggesting things could go either way. If it closes the gap instead of breaking out, it could be another sign that the US market may be set to underperform Canadian stocks as we head to year-end.

Listen to or download the interview below. You can also catch it on Howestreet.com's YouTube channel.

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